Vector SCM

August 23, 2001

Novi, Michigan

Richard Armstrong

Key Menlo/Vector Personnel:

Jim Fields, Vice President of Business Development for Menlo Logistics

Greg Humes, Vice President and COO of Vector SCM

VECTOR SCM IS FOR REAL

General Motors Corporation and CNF, Inc. have formed a joint company to handle supply chain management. The new company, Vector SCM headquartered in Novi, MI, is already heavily engaged in redesigning GM’s supply chain. Major redesigns are occurring first in a series of transportation areas. These include:

North American Optimization (Material to Assembly and Manufacturing plants)
Outbound Vehicle Visibility (on a Global bases)
Premium Transportation (North America)
Rail Operating Center (North America)
International Optimization (Material to South America, Asia Pacific & Europe)
Detroit Distribution Center (Re-Design & Implementation)

Vector’s top management and board of directors have identified 18 business case projects that will be implemented over the next year, and 46 additional projects that will be addressed by 2003.

The board of directors is actively involved. It includes Greg Quesnel, CEO of CNF, Inc.; John Williford, CEO of Menlo; Ed Feitzinger, VP – Technology of Menlo plus key GM players John Gough, Executive Director Global Logistics and Harold Kutner, VP – Production Control & Logistics. GM owns 20% of the stock – CNF has 80%.

Key Vector executives include Gary Kowalski, President and CEO; James Commiskey, VP – Global Services and Greg Humes, VP and COO. Kowalski is a former GM logistics executive. Commiskey was an Emery worldwide sales executive and primarily responsible for selling Vector to GM. Humes is a highly respected operations executive who was the president of the global automotive group of Penske Logistics. He is a Leaseway alumnus who tripled the size of Penske’s operation during his tenure.

Vector will operate as a 4PL contracting with strategic logistics partners. Ultimately it will control most of GM’s global multi-billion dollar logistics spend. Currently this amounts to $6.2 billion when GMSPO is included.

There are 200 employees in Vector now. Overseas Logistics Control Centers include Frankfurt, Singapore and Sao Paulo.

Vector is using CNF’s proprietary systems along with CAPS and i2 for Transportation Management and Transcentric for visibility. It cooperates extensively with Menlo on IT and strategy. It will be an integrator of Menlo’s new Logistics Management System.

Vector should be profitable for its first fiscal year with revenue of $35 million. Pricing emphasizes gain sharing, other pricing involves management fee plus and consulting.

Harold Kutner has stated that GM aims to cut its inventory costs in half from $40 million in the next three to five years. Vector’s SCM is expected to play a key role in these changes.

For CNF, Vector is a good antidote to problems with Emery’s grounded fleet and Menlo’s $23 million write-off because of HomeLife’s failure.